Friday, March 13, 2015
Posted by dkuehn at 6:55 PM
The last twelve months have really been The Year of Inequality. It started with the English translation of Piketty's book and it has taken over the political agenda. Over the last year I've regularly heard too odd critiques of the preoccupation with inequality:
1. Inequality doesn't matter, poverty does
2. Inequality only matters if it comes through corruption, and in that case it's just a symptom
Obviously both have a kernel of truth. Poverty matters a lot. We have been studying the "wealth of nations" for 250 years because poverty is critically important. We also rarely believe that it would be unfair for everyone to earn the same income. That point goes back to Aristotle at least. What matters is illegitimate inequality, and this is the sentiment that the second objection tries to piggy-back on.
However, caring about poverty and corruption does not eliminate the case for concern about inequality that does not arise from corruption in a relatively wealthy society (e.g., most of the inequality Piketty writes about). We care about inequality because (1.) of our sense of fairness, and (2.) the fact that opportunities or capacities are unevenly distributed independent of any additional corruption that may exacerbate inequality further. As I write this it seems like a basic point. It feels a little silly to even make it. But I've seen both of the above objections with such frequency that I feel like I have to.
So does dealing with this sort of inequality violate Aristotle's principle that the worst form of inequality is making unequal things equal (not that we are obligated to care of course)? It may, but it may not. There are two big problems with Aristotle's principle as I see it (I'm almost certainly reinventing the wheel here - I didn't take much philosophy so you can fill in the details if I am). First, I don't see why any ethical significance attaches to natural and/or random endowments of capacity or opportunity (if random shocks are a random draw by Nature, these can be considered together). I should hope this was obvious from about the time the words left Aristotle's mouth. In fact I should hope a couple sentences down he notes this and it just doesn't get quoted as much.
The second reason why applications of Aristotle's principle are tricky is particularly relevant to Piketty and a capitalist economy: these systems are recursive and intergenerational, so one period's outcomes are the next period's opportunities. That's really the whole point of capital of course - it endures through periods of time and is productive in future periods. How do we think about Aristotle's principle in a recursive system? Is redistributing capital "making unequal things equal" or is failing to redistribute capital "making equal things unequal"? This is tricky enough in one generation because you have to distinguish between effort and luck of birth (assuming you agree with my first point that no ethical significance attaches to natural or random endowments of capacity or opportunity and therefore that redistribution in favor of those born into very unlucky circumstances is permissible). It gets very hard indeed when we move beyond one generation, because the choices of parents become the endowments of children.
Poverty obviously matters but a basic sense of fairness justifies caring about this even in a rich, uncorrupt society.
What we do about it of course compounds the difficulties for a number of well understood reasons having to do with behavioral responses.